The compensation scheme for businesses for September 2020 to February 2021 (compensation scheme 2) is regulated by:
The clarifications are based on previous clarifications following compensation scheme 1 (March – August 2020) made by the Norwegian Tax Administration, as well as new clarifications and adjustments made by the Brønnøysund Register Centre and the Ministry of Trade, Industry and Fisheries concerning the current compensation scheme.
The clarifications are grouped and presented according to chapter and section in the Regulation. Clarifications made after opening of the application portal (18 January 2021) are dated.
Chapter 1. Scope
Status of merger/demerger as of the date of application:
It is the status of the enterprise as a legal person as of the date of application that must be used when applying for a grant. In the case of a demerger or merger, this means that provided the application date falls before the date on which the demerger or merger is registered in the Register of Business Enterprises, the enterprise must apply on the basis of its registration status as of the application date, based on its financial statements. This applies even if accounting effect is set to 1 January.
Clarification 21 January 2021 – General:
Enterprises with activity which falls under Section 1-3 of the Regulation are not covered by the scheme, even if they also carry on other activities. These enterprises are not eligible to apply for grants.
Demergers completed on or after 1 January 2020:
Enterprises that acted as the transferor or transferee in a demerger which was assigned the status ‘completed’ in the Register of Business Enterprises on or after 1 January 2020 cannot apply for grants.
Information on the timing of when a merger/demerger is deemed to be completed in the Register of Business Enterprises can be found in the Brønnøysund Register Centre’s announcement solution: www.brreg.no.
Clarification 1 February 2021 – Intragroup demergers
An enterprise in a corporate group which has acted as the transferor or transferee in a demerger within the group cannot apply for grants individually. Such enterprises may be included in joint applications for the group.
Part of the business is taxable:
If an enterprise has a number of business areas, but not all these business areas are covered by the scheme under this provision, the requirement for a decrease in turnover for the part of the enterprise which operates a business which is covered by the scheme can apply for grants.
Chapter 2. Conditions for receiving subsidies
It is a requirement that at least one employee of the applicant is registered in the Register of Employers and Employees (Aa-registeret) at the time of award. The applicant must also have paid out salary to at least one employee for at least one calendar month during the period August 2019 to September 2020.
There is no requirement for employees to have a certain full-time equivalent (FTE) position, or for their working hours to be distributed evenly over the year according to this provision. However, there must be a genuine employment relationship.
There is no requirement for the enterprise’s employees to be resident in Norway, provided certain other conditions are met.
Groups and employees:
If an enterprise applies for a grant for the group as a whole under Section 3-4 (2), it is sufficient for one company in the group covered by the group application to meet the requirement regarding employees in Section 2-1 of the Regulation.
General partnerships and employees
Income from general partnerships must constitute work remuneration, so that personal income is calculated; see Section 12-2(f) of the Tax Act.
‘Partners’ means personal partners in a general partnership.
The following companies are considered to be general partnerships in this context:
- General partnerships with joint liability (ANS)
- General partnerships with pro rata liability (DA)
- Shipping partnerships (PRE).
Sole proprietorship is the main source of income for the owner’s spouse
Income from the enterprise is considered to be the main source of income when the income accounted for at least 50 percent of the partner’s or owner’s personal income either in 2019 or in January and February 2020.
The owner’s main source of income must be the sole proprietorship in order to be covered by the scheme. Any spouse’s income from the enterprise is not included in the owner’s personal income.
The term ‘turnover’ in the context of construction projects:
By ‘turnover’ under Section 2-2 of the Regulation, we mean income from sales of goods delivered and services provided by the enterprise during the period concerned. Within the construction sector, sales documents must normally be issued according to “progress made”; see Section 8-1-2a of the Bookkeeping Regulation. For this sector, “progress” is an indication of “delivery”. It is the value of goods delivered and services provided, including “profit”, which must be declared, i.e. the accrued share of the agreed consideration. This applies regardless of how the sales are treated in accounting terms.
In connection with works performed under a tender or similar, the agreed payment schedule must be used as a basis for invoicing, unless this schedule differs significantly from the actual progress made during the period; see Section 5-2-4 of the Bookkeeping Regulation. This may result in a minor discrepancy in relation to actual progress. For example, if an invoice is issued in October for construction work carried out in September under an agreed invoicing schedule, invoiced turnover in October may be included as sales for September if this does not differ significantly from the actual progress that is made.
In the case of enterprises that have projects which commence in their entirety or in part under “the enterprise’s own auspices”, turnover will not be deemed to exist until a sales contract (e.g. housing) has been established. In such cases, the turnover must be recognised as contracts are established and construction work progresses. If a contract is established only once a residential property has been completed, the turnover must be recognised as of this date.
Turnover and grants from the public sector:
Section 2-2, second paragraph stipulates that public grants and income safeguards issued in connection with the coronavirus pandemic are considered to be turnover. This applies if grants are awarded in order to replace income from the sale of goods delivered and services provided.
The Regulation must be interpreted as indicating that this applies to all types of grants from the public sector, not just grants awarded in connection with the coronavirus pandemic. The decisive factor is whether the grant is regarded as income from the sale of goods or services (turnover under the first paragraph) or compensation for such income (turnover under the second paragraph). The grants which are considered to constitute income must be determined based on the aforementioned criteria.
Benefits that an owner of a sole proprietorship or partner in a general partnership has received from NAV to compensate for lost turnover within the enterprise, such as sickness benefit, parental benefit, care allowance, work assessment allowance, and carer’s allowance must be included in the turnover. The same applies to benefits received from NAV under compensation schemes for self-employed persons and freelancers.
The following are not considered to constitute turnover under Section 2-2 second paragraph:
- Grants under the Regulation pursuant to the Act on a temporary grant scheme for enterprises experiencing a substantial decrease in turnover
- Grants under this Regulation
- Donations from private individuals of up to NOK 3,000 during the period for which a grant is sought.
- Grants awarded under the Act on grants in connection with interrupted leave
- Grants awarded under the scheme administered by Innovation Norway for liquidity strengthening to facilitate restructuring and reopening of the tourism industry
Grants intended to cover training and skills development for employees are not considered to constitute compensation for lost income. The same applies to grants to cover additional costs in connection with infection control measures.
Return on capital:
Income or return on capital, property and other financial assets are not considered to constitute turnover and must not be included. However, rental income from property is still considered to constitute turnover.
Clarification 21 January 2021 – Fixed assets:
Sales of fixed assets must only be included in the turnover of an enterprise where such sales represent the enterprise’s main source of income (car, truck and construction plant dealers, etc.). Vehicle dealers will treat these as inventory (current assets) in their accounts and come under Section 2-2 (1).
Value Added Tax (VAT) and excise duties
Value added tax (VAT) and excise duties linked to sales income are not considered to be income.
Clarification 21 January 2021 – Calculation of decrease in turnover for enterprises with one or more sub-entities
When calculating the decrease in turnover, enterprises must calculate the total decrease in turnover for all its operations. This means that the turnover of all sub-entities must be taken into account in the calculation.
Submission of tax returns, Section 2-6 first paragraph (c) of the Regulation:
Tax returns for wealth and income tax will be deemed to have been “submitted” for the purposes of the Regulation if the enterprise has submitted the return, even in cases where the auditor has submitted a negative audit report and not signed the income statement.
Payment of arrears; see Section 2-6 first paragraph (b) of the Regulation:
Taxes, duties and withholding tax which fell due for payment before 29 February 2020 must be paid in full by no later than the application date. Payment agreements entered into linked to claims which fall due for payment before 29.02.2020 must also be paid in full.
Chapter 3. Grant amount
Clarification 21 January 2021 – Compensation paid out by insurance policies;
Insurance payments under Section 3-1(6) must be deducted from grant payments. Such payments are not considered to constitute turnover under Section 2-2(2)
To be considered as fixed and unavoidable, a cost must be linked to an agreement established before 1 September 2020. A cost may also be linked to an agreement signed before 1 September that has been renewed since 1 September without any extension to the scope of the agreement and without price adjustment over and above normal price adjustment. However, costs incurred in the preparation of financial statements and auditing do not need to relate to agreements established before 1 September 2020.
Costs linked to agreements with an upper limit on the scope of goods and service deliveries are only considered to be fixed and unavoidable up to the level of goods and service deliveries that had actually been delivered to the enterprise as of 1 September 2020.
Costs must be reduced by any discounts, price reductions, etc. granted for the month for which the support applies.
Costs which, according to the enterprise’s accounting standard, are to be recognised in the balance sheet, such as indirect fixed costs recognised as manufacturing costs or construction loan interest, cannot be considered fixed, unavoidable costs.
VAT which can be deducted by the enterprise in the VAT statement is not considered to be a fixed, unavoidable cost according to the Regulation.
Fixed, unavoidable costs for the rental and leasing of fixed assets or property must be reduced by income from subleasing of the fixed assets or property.
Property tax must be entered under item 7700 in the income statement and are not to be considered as a fixed, unavoidable cost. Section 3-2 (2) states that costs may be considered as fixed and unavoidable insofar as they can be entered under the specified items in the income statement as stipulated in the provision. The cost’s cost code is of no significance. It must be documented what costs are included and in what amounts, e.g. a contract showing the basis for allocation, how the tax was calculated and what it covers. The agreement must be established before 1 September; see Section 3-2(4) of the Regulation.
Car leasing or rental:
The cost of operational and financial leasing may be included and accrued in the same way as other rental costs, regardless of the items under which the leasing cost is recognised in the enterprise’s income statement, and regardless of how the leasing cost is accrued according to the accounting standard that the enterprise uses. In the case of leasing, the rental amount for the period must be distributed evenly over the period covered by the leasing.
Costs recognised under other items in the income statement may also be covered:
The decisive factor is whether the nature of the costs is such that they can be attributed to the listed items in the income statement and that this can be documented. The enterprise must then be able to document the costs that are included and in what amounts for each type of cost. Documentation could for example be a contract showing the basis for allocation, how the cost was calculated and what it covers. The contract must be established before 1 September 2020.
Enterprises affiliated to a joint venture where the administration company handles joint costs and invoices each individual enterprise for a specific share may be considered to be a “fixed and unavoidable” if this arrangement can be documented; see above.
Lease agreements where a proportion of the rent is linked to joint expenses (caretaker services, insurance marketing costs, etc.), for example, must be assessed in order to determine the extent to which the joint costs are costs which are covered by the items listed in Section 3-2 (2) and whether these costs are considered to be “fixed and unavoidable”. The proportion of the rent costs which include cost types that are not covered under the Regulation, such as costs for marketing, security, cleaning, etc., cannot be included in the cost basis.
Leasing of outdoor areas:
The leasing of premises also includes the leasing of outdoor areas which are used in the enterprise’s business, e.g. car parks, storage areas and parking spaces.
Costs attributable to private waterworks:
Costs attributable to fixed, ongoing agreements with private enterprises concerning refuse collection are considered to be fixed, unavoidable costs in the same way as with similar public services. The same applies to costs for private waterworks which form part of the public water supply network. This assumes that they are services which the public sector will provide and the private service is on a par with corresponding public services.
Costs for licences:
Item 6400 Hire of machinery, fixtures and fittings, vehicles, etc. may also include fixed licence costs, e.g. for finance systems, cashier systems, appointment booking systems and HR list systems. Such costs give entitlement to compensation.
However, a distinction must be made with respect to costs which ordinarily come under item 7600 Licences, patent costs and royalties, which are not covered by the scheme. These are normally “costs for licenses, patents and royalties in connection with own production and/or sales”.
Expenses for taxi depots:
If a tax paid by a taxi depot includes fixed, unavoidable costs, the verifiable proportion of the tax which can be attributed to the specified items in the income statement in Section 3-2(2) of the Regulation can be included as a basis as a fixed, unavoidable cost. It must be documented what costs are included and in what amounts, e.g. a contract showing the basis for allocation, how the tax was calculated and what it covers. The agreement must be established before 1 September; see Section 3-2 fourth paragraph of the Regulation.
Franchise fees are normally recognised under item 7600. However, if a proportion of the tax can be attributed to the specified items in the income statement, such as (fixed) rent, the verifiable share of the cost can then be included as a fixed, unavoidable cost.
Interest on late payments:
Interest on late payments is not considered to be a fixed, unavoidable cost, and are not covered.
Letting of residential property
Fixed rental costs for residential properties as part of commercial short-term letting must be recognised under item 6300 of the income statement, and are considered to constitute fixed, unavoidable costs for the lessor (commercial premises).
There is a fixed monthly rent under contracts established before 1 September 2020 which must be included as a cost in the grant calculation, regardless of whether the parties agree any reduction in rent for periods after the month for which support is awarded.
If a reduction in rent is agreed for the support month, the reduced rent must be included as a fixed, unavoidable cost. In cases where the rent is reduced in the support month and the reduction is reversed, it is the fixed monthly rent under the contract established before 1 September 2020 which must be included as a cost in the grant calculation. This applies regardless of whether any rent reduction is agreed for subsequent periods after the months with support. Such waiving is not covered by Section 3-2, tenth paragraph of the Regulation.
Clarification 21 January 2021 – Residential properties used by employees:
Residential properties hired by an employer for use by its employees are not to be considered as commercial premises or a fixed, unavoidable cost.
Clarification 21 January 2021 – Interest expenses:
The term ‘interest’ in Section 3-2(3) of the Regulation only covers interest on loans which had been taken out as of 1 September 2020. Other costs and fees incurred in connection with the set-up and repayment of loans are not covered. Interest which, according to the enterprise’s accounting standard, is to be recognised in the balance sheet as a manufacturing cost or construction loan interest, are also not to be considered as a fixed, unavoidable cost.
This means that interest rate swaps, fees, overdraft facilities and associated fees, guarantee costs for withholding tax accounts, refinancing costs and set-up costs for bond loans must not be included as fixed, unavoidable costs.
Clarification 21 January 2021 – Overdrafts/cash pools:
It is the agreed overdraft limit as of 1 September 2020 which determines the interest expenses that can be included as a fixed and unavoidable cost.
Interest expenses on overdrafts up to the agreed overdraft limit as of 1 September 2020 may be included as fixed and unavoidable costs. Interest expenses on an overdrawn overdraft or on overdraft facilities which have been extended beyond the level agreed as of 1 September 2020 cannot be included as fixed and unavoidable costs.
Clarification 21 January 2021 – Intragroup billing:
Expenses attributable to intragroup services can be included in the application if an intragroup agreement was in place as of 1 September 2020. The agreement must document the services that are to be provided (accounting), and the recipient must have received the service in accordance with the agreement. The agreement must also state how the prices charged for the services are calculated.
Clarification 2 March 2021 – Travel Guarantees
Guarantee commissions for the obligatory travel guarantee for providers of package tours, and the yearly fee to the Norwegian Travel Guarantee Fund cannot be included as a fixed, unavoidable cost.
Groups – joint application or individual applications:
Enterprises which are part of a group of companies must coordinate the application process for each grant period. They must decide whether to submit individual applications for each individual enterprise or a combined application for the group as a whole. If one or more enterprises in the group have submitted individual application(s), a single grant application cannot be submitted for the group as a whole during the same grant period.
Clarification 1 February 2021 – Ownership structure of corporate groups
In the case of corporate groups, the ownership structure in force as of the first day of the grant period must be used.
Clarification 1 February 2021 – Which enterprises must be included in a joint application for a corporate group
Joint applications for corporate groups must include all the enterprises in the group, except those which are not covered by the grant scheme. For example, an enterprise that is not covered by the scheme in accordance with Section 1-3 cannot be included in a joint application for grants for the group to which it belongs.
Chapter 4. Administration and requirements regarding applications
Requirement for affiliation to an audit or accounting firm for the person who is to verify the application:
There is a separate guide outlining the content and requirements for a confirmation from an auditor or an authorised accountant. The guide also applies to confirmations that must be attached to the annual accounts or the submitted tax return for 2020.